All Forum Posts by: John Sayers

To me you are adding cost, time and more potential source points of future audit/review etc. All things equal in a deal, the return seems to be net lower than a single K-1 of same deal outside of a fund structure; especially if you are in a state with no income tax already and so is the deal. Of course there are other risks to weigh if all things were not equal; beyond the said tax and multi-state part.

On a side note, most funds are setup in a way that will cause you to file tax-returns in multiple states each year. Some may do a 1099-DIV route and some may pay state taxes on the investor's behalf. No method is good or bad as the individual investor gets to decide that, however it is good to be aware that some methods of investing have more overhead and actions for the investor.

Quote from @Nicolas Leon:

Oh I thought when you went to a tax sale and won the bid you would get full ownership and the previous owner wouldn't be able to redeem thought that only happened with tax certificates. And even if they redeemed wouldn't they pay interest on it that i would be profiting from?

 In TX there are redemption windows before obtaining full ownership. See https://statutes.capitol.texas...  (statutes.capitol.texas.gov/Docs/TX/htm/TX.34.htm#34.21 ) and search for "may redeem" to get the gist; but a mentor, or edu, is a good idea to avoid the pits.

Quote from @Nicolas Leon:

Is there anyone In the Dallas area that is a mentor or has classes on tax sales and how to wholesale them I'm just getting started into real estate and this is probably one of the cheapest ways to get in but more complicated any advice would be greatly appreciated 

To your question, I hear Arnie Abramson /txtaxsales "may" have some of the guidance you seek. Not an endorsement, just info to recon as I have no direct experience.

Arnie Abramson

"In addition to the moral hazard, bailing out banks can also be costly
for taxpayers. The funds used to bail out a failing bank are typically
drawn from the public coffers, meaning that taxpayers foot the bill.
"

Concepts like this come up a lot that taxpayers lose.  The data shows that in the banking crisis (08+ era), taxpayers netted billions in profits from Citi and others who obtained true bailout investments. Overall, taxpayers lost nothing and quickly earned billion and billion in net gains.

Tangent: FDIC Insurance, being non-bailout funds, is paid for by the premiums charged directly to banks. As many know, taxpayers funds do not cover any of the bank failures we see each year.

When the FDIC funds took a large than normal hit in 08-10 region, ALL Banks (those that had no losses) footed the bill via super high premiums and special assessments. CUs too, in NCUA Insurance. They made all of them pay for the transgressions of a few. The taxpayers did not pay.

As far as the market rate goes, I can only suggest a trusted CRE broker or lender/Ln broker that operates in the area as they will see a volume of current/recent comparable deals and can give a general range for a particular property type/class, in the particular area. IF you know any active MF buyers in the market, they should  also have an idea of the current range.

Some regional data is available online, but specific sub-markets may require a subscription to a data service.

Unless licensed, they can't just raise $ (must do more roles), nor be compensated based specifically on how much they bring in. But ask a SEC lawyer.

Find a specialist is my top tip. I've researched it some in 22 but it is a bit of a web and I'm no pro.
There are ongoing compliance rules and procedures that would seem to require a PM that is well versed in the LIHTC process so as to keep one out unintentional compliance trouble. How units turn, how units are allocated, how moves form one building to another work etc.

"I am wondering how rents are determined and how often they adjust?"

Ultimately annually seems "how often", but check how often HUD adjusts the local AMI as that # ultimately controls the end result.
Rent calcs need at minimum the below but there are a few nuances and other details in order to dial it in (novoco has an estimate tool):
- the set aside % of AMI rate,
- the # of bedrooms and
  -the HUD set AMI.

Additionally I suggest: 
-Know what the contractual rent percentage(s) (depends on the deal) of the Area Media Income (AMI) are for that specific property. Generally the limitations do not normally apply to all units, so know how many are avail for market rate.
-Find out how much time is left in the requirements (new deal or 10 years + later) overall and any exit options that are available, if desired.

Find a specialist or at least do a LOT or recon.

I like to see them all so I can put the big picture in focus for my needs. Any one measure on it's own can be incomplete and sometimes used to be misleading to those that are new or less numbers inclined.

Good list! And what Mr Gesis said for sure. "a transparent sponsor will be able to nearly answer all these questions with a good offering memorandum"
The OA and PPM (+ the webinar/presentation) should answer most of these items as a sponsor rarely take a lot of time to personally answer a long list of 1-on-1 questions (>10) from a prospective LP, unless they are really having trouble raising money. They general will move to the investors that ask the least questions. Personally, if the information provided does not provide the vast majority of the answers upfront, I won't bother asking and will move on to another deal as the GP is basically not transparent enough if I have to ask a ton of questions.